Earlier from the BEA: Gross Domestic Product, Second Quarter 2022 (Advance Estimate)
Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 1.6 percent. …
The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased.
emphasis added
The advance Q2 GDP report, at -0.9% annualized, was below expectations, primarily due to a negative impact from a decrease in inventories.
Personal consumption expenditures (PCE) increased at a 1.0% annualized rate in Q2.
The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.
In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So, the usual pattern – both into and out of recessions is – red, green, blue.
Of course – with the sudden economic stop due to COVID-19 – the usual pattern didn’t apply.
The dashed gray line is the contribution from the change in private inventories.
Click on graph for larger image.
Residential investment (RI) decreased at a 14.0% annual rate in Q2. Equipment investment decreased at a 2.7% annual rate, and investment in non-residential structures decreased at a 11.7% annual rate.
On a 3-quarter trailing average basis, RI (red) is down, equipment (green) is up, and nonresidential structures (blue) is still down.
The second graph shows residential investment as a percent of GDP.
Residential Investment as a percent of GDP decreased in Q2.
I’ll break down Residential Investment into components after the GDP details are released.
Note: Residential investment (RI) includes new single-family structures, multifamily structures, home improvement, broker’s commissions, and a few minor categories.
The third graph shows non-residential investment in structures, equipment and “intellectual property products”.